Monday, January 30, 2012

The morality of taxation

Mehdi Hasan has a good line from Oliver Wendell Holmes Jr in his piece calling for higher general taxation.

"I like paying taxes," the US supreme court Justice Oliver Wendell Holmes once remarked, "with them I buy civilisation."

Hasan goes on to argue that the budget deficit could and should be closed largely by taxation, rather than cuts in public spending.

There are three points that this raises. The first is that the structural part of the budget deficit (i.e. that part that we can't just leave to economic growth to sort out) is about £61bn. Total income tax receipts in 2010/11 were £153bn. That's an awful lot of additional taxation, especially at a time when the talk is all of neo-Keynesian financial stimulus. Hasan correctly identifies that a large cause of the deficit was plummeting tax receipts, but to carry on to say that the solution is sky-rocketing tax rates seems to me a bit of a stretch.

The second is here:

Third, poll after poll shows overwhelming public support for a tax on bankers' bonuses; a mansion tax on multimillion-pound properties; a windfall levy on the oil and utility companies; a Robin Hood tax on financial transactions; and a one-off wealth tax of 20% on the richest 10% of households (which would raise a whopping £800bn and, according to YouGov, is backed by three out of four voters).

That people are in favour of tax increases that don't affect them shouldn't be too much of a surprise (but, Jesus, a one-off confiscation of 20% of the total assets of 2.2 million households? I suspect that this won't be making its way into any mainstream manifesto...).

And the third is this:

Perhaps we can update Justice Holmes's mantra for our age of austerity: I like paying taxes, with them I pay down the deficit.

When Oliver Wendell Holmes made his civic minded declaration about the awesomeness of taxes, US Federal tax receipts made up 2.71% of US GDP, with State taxes pushing the total burden up to about 7%. If my tax rates were so low, I'd probably be a bit happier when I saw the state's take off the top of my income.

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